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If your going from Windows XP Home Edition SP1, to Windows XP Home Edition SP2, it's not really an upgrade that will make major changes your system.
It's just an installation of a service pack.
It shouldn't affect anything on your computer.
Just make sure your computer is infection free, before the install.

In answer to your question, though, there's no way to save, installed programs, short of imaging the disk, and if you did that, then restored it, you'd be back to SP1, again.

I suggest running chkdsk on your system and defragging it...before attempting to install SP2 again. Not sure why your system becomes unstable but those are the two easiest items to take care of in order to maximize system stability.

Run chkdsk to completion on the C: partition, then run defrag on same partition. Then try your SP2 install again.

If you are going to use the RUN as a start point, type in chkdsk /r (not f, r includes the f functions and more).

If you ran it without any letter, then all it did was just read, did not correct anything. The /r factor is the most complete correction/recovery mode of chkdsk.

Start/Run....chkdsk /r You don't have to indicate what drive/partition is intended, it will run on the C: partition by default and those messages are normal (about it running on the next boot), since chkdsk /r cannot run on the boot drive while it is being used (XP is open).